Company File Setup and Maintenance

1
Company File Setup and Maintenance

• Chapter 6

2
Objectives

• Use the EasyStep Interview
• Adjust Customer and Vendor Balances after using
  the EasyStep Interview
• Perform a Complete Company File Setup The
  12-step process
• Choose a Start Date
• Create the QuickBooks Company File
• Set up QuickBooks Lists
• Gather Your Information for Setting up Opening
  Balances

271
3
Objectives (contd.)

• Enter Opening Balances
• Enter Year-to-Date Income and Expenses
• Adjust the Opening Balance for Sales Tax Payable
• Adjust Inventory for Physical Quantities on Hand
• Verify your Opening Balances
• Close Opening Balance Equity into Retained
  Earnings
• Back up the File and Setting the Closing Date
• Set up Users and Passwords

271
4
272
5
Launching the EasyStep Interview

• The EasyStep Interview feature walks you through
  the setup of a company file
• Select the File menu and then select New Company
• The EasyStep Interview window appears
• To navigate click Next or Prev
• To exit the Interview and retain all changes,
  click Leave

272
6
Entering Opening Balances in the EasyStep
Interview

• The following problems result from entering
  opening balances during the EasyStep Interview
• QuickBooks posts the opening balances to accounts
  called Uncategorized Income and Uncategorized
  Expenses
• It is best not to enter Opening Balances for
  customers using the EasyStep Interview

284
7
Adjusting Customer Opening Balances

• Each customer for whom you entered an opening
  balance will have an Invoice that you must either
  edit or replace
• Edit the Item column to indicate the Items that
  you sold on the Invoice
• Also, change the date to the original Invoice
  date and enter the Invoice number of the original
  Invoice

285
8
Adjusting Vendor Opening Balances

• Each vendor for whom you entered an opening
  balance will have a Bill that you must either
  edit or replace

288
9
12-Step Process

• Choose a QuickBooks start date
• Create a new QuickBooks company file and
  configure your preferences
• Set up your Chart of Accounts, company lists
• Enter opening balances for Balance Sheet accounts
  (except Accounts Receivable, Accounts Payable,
  Inventory, Sales Tax Payable, and Retained
  Earnings
• Enter outstanding transactions including Checks,
  Deposits, open Invoices, and unpaid Bills as of
  the start date
• If you are setting up mid-year, enter your
  year-to-date income and expenses

288
10
12-Step Process (contd.)

• Adjust Sales Tax Payable
• Adjust Inventory to match your physical counts
  (page 5) and set up Fixed Assets
• Set up payroll lists and year-to-date payroll
  information
• Verify that your Trial Balance report matches
  your accountants Trial Balance on your start
  date
• Close the Opening Balance Equity account into
  Retained Earnings
• Back up your company file and set the Closing
  Date and the Closing Date Password to lock the
  file as of your start date

288
11
Choosing a Start Date Step 1

• Your start date is the day before you start using
  QuickBooks to track your daily transactions
• It is also the date for which you have complete
  information for your opening balances
• Best start dates
• Calendar-Year Basis
• December 31
• Fiscal Year basis
• Last day of fiscal year
• For a new company
• First day of the business

289
12
Creating the Company File Step 2

• Launch QuickBooks
• Select the File menu and then select New Company
• Click Next on the first three windows of the
  EasyStep Interview
• On the fourth window of the EasyStep Interview,
  click Skip Interview
• Enter your company information and click Next
• Select the Company type and then click Next
• Enter the file name and location where you want
  to save your company file, click Save
• It will create your company file with extension
  .QBW

290
13
Setting Up the Chart of Accounts Step 3

• To set up the Chart of Accounts, you will use the
  following
• Account Types
• Activating Account Numbers
• Adding Accounts
• Adding Subaccounts
• Removing Accounts from the Chart of Accounts
• Turning Off Account Numbers
• Reordering the Account List

294
14
Account Types

• Assets
• Bank
• Accounts Receivable
• Other Current Asset
• Fixed Asset
• Other Asset
• Liabilities
• Accounts Payable
• Credit Card
• Other Current Liability
• Long Term Liability

• Equity
• Income
• Income
• Other Income
• Expenses
• Expense
• Other Expense
• Cost of Goods Sold

295
15
Activating Account Numbers

• Select the Edit menu and then select Preferences
• On the Preferences window, click on the
  Accounting icon, and select the Company
  Preferences tab
• Then check the Use account numbers box and click
  OK
• QuickBooks does not require account numbers

295
16
Adding Accounts

• Select the Lists menu and then select Chart of
  Accounts
• Select the Account menu at the bottom of the
  Chart of Accounts window and then select New
• Select account type and enter the name etc.

296
17
Adding Subaccounts

• If you want more detail in your Chart of
  Accounts, you can add Subaccounts
• In the New Account window check the Subaccount of
  field and select the main account from the
  drop-down list

298
18
Removing Accounts from the Chart of Accounts

• Following options are available in QuickBooks to
  delete accounts
• Deleting Accounts - Option 1
• Deactivating Accounts - Option 2
• Merging Accounts - Option 3
• QuickBooks will not allow you to delete an
  account if you have used the account in an Item
  record or transaction
• If this is the case, use either Option 2 or
  Option 3 to remove the account from view in the
  Chart of Accounts

299
19
Deleting Accounts Option 1

• Select the account in the Chart of Accounts list
• Select the Account menu at the bottom of the
  Chart of Accounts window and select Delete or
  press CTRLD

299
20
Deactivating Accounts Option 2

• If you cannot delete an account, you can
  deactivate it which will cause it to disappear
  from the Chart of Accounts and reduce the
  clutter
• Select the account in the Chart of Accounts.
• Select the Account button and then select Make
  Inactive from the menu
• You can still see the account in historical
  transactions and reports
• To view all accounts, including the inactive
  accounts, click Show All

300
21
Merging Accounts Option 3

• When you merge two accounts, QuickBooks edits
  each transaction from the merging account so that
  it posts to the merged (combined) account
• For example, if you merge the Entertainment
  account into the Meals account
• QuickBooks will edit each transaction that posts
  to Entertainment, making it post to Meals instead
• Then QuickBooks will remove the Entertainment
  account from the Chart of Accounts list
• Merging Cannot be Undone
• Once you merge accounts together, there is no way
  to find out which account the old transactions
  used (except by reviewing from a backup file)

301
22
Reordering the Account List

• You can sort the Chart of Accounts list by the
  account name or number, by the (online status),
  or by the balance amount
• When account numbers are inactive and you click
  the Name header, QuickBooks sorts the account
  list alphabetically by account name
• When account numbers are active and you click the
  Name header, QuickBooks sorts the list by account
  number
• Click the other headers to sort by (Online
  status), Type, or Balance

302
23
Setting Up Opening Balances Step 4

• Gathering Your Information
• Entering the Opening Balances
• Understanding Opening Balance Equity

305
24
Gathering Your Information

• Trial Balance for your start date
• Bank Statements (all accounts)
• Outstanding Checks and Deposits
• Open Invoices
• Unpaid Bills
• Employee List and W-4 Information
• Payroll Liabilities by Item
• Year-to-Date Payroll Detail by Employee
• Year-to-Date Payroll Tax Deposits
• Physical Inventory by Inventory Part

305
25
Entering the Opening Balances Step 4 (contd.)

• To enter your opening balances youll use one of
  the three methods
• Method 1 Directly Editing the Account
• Method 2 Adding a Transaction Directly in
  Registers
• Method 3 Using a General Journal Entry to Record
  Opening Balances
• The method you use will depend on three factors
• How familiar you are with accounting
• Whether or not the account youre editing has
  transactions
• Whether you intend to use the Bank Reconciliation
  feature to reconcile your accounts

309
26
Method 1 Directly Editing the Account

• Use this method if youre less familiar with
  accounting
• Editing each account from the Chart of Accounts
  is the simplest way to enter opening balances for
  your Balance Sheet accounts
• Display the Chart of Accounts
• Select the Bank account
• Select the Account menu at the bottom of the list
  and then select Edit
• Enter the amount in the Opening Balance field

309
27
Method 2 Adding a Transaction in Registers

• Use this method if the account already has
  transactions
• you will need to enter a transaction directly in
  the register for the account
• Display the Chart of Accounts
• Double-click the account in which you want to
  enter an opening balance
• Enter a new transaction at the bottom of the
  register to record the opening balance using the
  start date and coding the entry to the Opening
  Bal Equity account
• Click Record to save the entry

311
28
Method 3 Using a General Journal Entry

• Use this method if youre familiar with using
  Journal Entries and if you understand debits and
  credits
• Select the Banking menu and then select Make
  General Journal Entries
• Fill in the Make General Journal Entries window
• You can use a General Journal Entry to record
  some, but not all, of your opening balances
• On the top line of each General Journal Entry,
  use an account called Journal Entries
• Use the Bank account type when setting up this
  account in your Chart of Accounts
• The Journal Entries account will never have a
  balance, so it will never show on financial
  statements
• It will have a register where youll be able to
  look at all of your General Journal Entries

312
29
Understanding Opening Balance Equity

• This account, which is created automatically by
  QuickBooks is affected by each of the opening
  balance transactions entered into QuickBooks
• As the opening balances for assets and
  liabilities are entered, QuickBooks automatically
  adds offsetting amounts in the Opening Bal Equity
  account
• Then, after all of the opening balances are
  entered, Opening Bal Equity will be closed into
  Retained Earnings (or Owners Equity).

314
30
Entering Open Items Step 5

• You must enter all the outstanding transactions
  using the original dates
• Outstanding Checks and Deposits
• Open Bills (Accounts Payable)
• Open Invoices (Accounts Receivable)
• Open Purchase Orders
• Open Estimates and Sales Orders

315
31
Entering Year-to-Date Income and Expenses Step 6

• If your start date is not at the beginning of the
  fiscal year, use a General Journal Entry to enter
  your year-to-date income and expenses
• The entry allows you to summarize the total
  income and expenses for the first few months of
  the year

319
32
Adjusting Opening Balance for Sales Tax Payable
Step 7

• Open the Sales Tax Payable register
• There will be entries for each of the open
  Invoices you entered, this is your uncollected
  tax
• The total Sales Tax Liability is a combination of
  the collected tax and the uncollected tax
• You will need to subtract the current balance in
  the account (the uncollected tax) from the amount
  shown on Trial Balance from your accountant to
  arrive at the unpaid collected tax
• Then create a Sales Tax Adjustment for this
  difference

320
33
Adjusting Sales Tax Payable
320
34
Adjusting Inventory, Set up Fixed Assets Step 8

• If you have inventory
• You will need to create an inventory adjustment
  to adjust the actual quantity and value on hand
  as of your start date
• This is done after you enter your outstanding
  Bills and Invoices, so that the actual inventory
  counts and costs will be accurate even if some of
  the Bills and/or Invoices include Inventory Items
• Setting up Fixed Assets
• If you have QuickBooks Pro or Premier, you can
  track detailed information about your companys
  Fixed Assets
• Setting up Loans
• If you have QuickBooks Pro or Premier, you can
  track detailed information about your loans

321
35
Setup Payroll Information Step 9

• Setting up payroll in QuickBooks is a lengthy and
  involved process
• See QuickBooks Payroll manual in this series for
  more information about setting up the payroll
  feature

322
36
Verifying your Trial Balance Step 10

• Before you transfer the balance of Opening Bal
  Equity into Retained Earnings, make sure the
  account balances in QuickBooks match your
  accountants Trial Balance
• Select the Reports menu, then select Accountant
  Taxes, and then select Trial Balance

322
37
Closing Opening Balance Step 11

• Once you have compared your Trial Balance report
  to your accountants report, use a General
  Journal Entry to transfer (close) the balance in
  Opening Bal Equity into Retained Earnings
• Select the Banking menu and then select Make
  Journal Entry

324
38
Setting the Closing Date and Backing up the File
Step 12

• Set the start date as the Closing Date to Protect
  your Setup Balances
• Backing up your data is very important part of
  insuring the safety of your data
• If your computer stops working
• If your hard disk crashes
• If you find a corruption in your file
• To back up your company file
• Select the File menu and then select Backup

326
39
Setting Up Users in the Company File

• QuickBooks provides a feature for defining
  users of the file
• This feature allows the administrator (the
  owner of the file) to set privileges for each
  user of the file
• Provides security and user tracking when several
  people have access to the same data file
• Select the Company menu and then select Set up
  Users
• Each user should have a password
• When a user opens the company file, QuickBooks
  requires a user name and password
• The privileges granted to that user by the
  administrator determine what functions of
  QuickBooks they can access

326
40
Summary of Key Points

• Use the EasyStep Interview
• Adjust Customer and Vendor Balances after using
  the EasyStep Interview
• Perform a Complete Company File Setup The
  12-step process
• Choose a Start Date
• Create the QuickBooks Company File
• Set up QuickBooks Lists
• Gather Your Information for Setting up Opening
  Balances

331
41
Summary of Key Points (contd.)

• Enter Opening Balances
• Enter Year-to-Date Income and Expenses
• Adjust the Opening Balance for Sales Tax Payable
• Adjust Inventory for Physical Quantities on Hand
• Verify your Opening Balances
• Close Opening Balance Equity into Retained
  Earnings
• Back up the File and Setting the Closing Date
• Set up Users and Passwords

331